Isaac Pushes Gas Prices Up, Oil Companies Return to Offshore Rigs

Most offshore oil and gas operators have returned to platforms and rigs in the Gulf of Mexico, restoring production following Hurricane Isaac, a slow-moving storm that caused more than one million power outages in Louisiana, Arkansas and Mississippi, pushed gas prices up more than 20 cents, and brought slight relief to farmers in some drought-stricken areas of the US.

As of Monday, regional transportation systems were up and running and power had been restored to Arkansas and Mississippi. About 117,000 remained without power in Louisiana, according to the US Department of Energy.

About 58 percent of daily oil production and 38 percent of natural gas production in the Gulf of Mexico is shut in, a vast improvement from last week when as much as 95 percent of oil and 72 percent of natural gas production were offline as operators evacuated rigs and platforms ahead of the storm, according to the Bureau of Safety and Environmental Enforcement.

As of Monday, only one refinery remained shut, representing 247,000 barrels per day of capacity, or 3 percent of total Gulf of Mexico refining capacity. Nine other refineries in the path of the storm are restarting or are operating at reduced rates, the DOE said.

Today gasoline prices hit a national average of $3.82 per gallon of regular, 22 cents higher than a month ago, according to AAA.

Last week the EPA temporarily waived certain federal clean gasoline requirements for Louisiana due to Isaac’s predicted impact. The waiver is effective for 10 days and allows the sale of 9.0 psi conventional gasoline in fourteen Louisiana parishes.

The storm was largely responsible for pushing up the price of gasoline. However, the widespread US drought, which has damaged large swaths of corn and caused corn-based ethanol prices to skyrocket, has also been blamed for higher gasoline costs.

Isaac brought rain to dry farming states such as Arkansas, Missouri, Illinois, Indiana and Ohio. Other drought-stricken states including Kansas, Nebraska, Oklahoma, Colorado and Iowa received little rain. Isaac’s path brought rain to only about one-third of the nation’s drought-affected area, the WSJ reported.

About 63 percent of the nation’s hay acreage, 72 percent of its cattle acreage, 86 percent of corn and 83 percent of soybeans are within an area experiencing drought, according to the US Drought Monitor released by the USDA.

The USDA last week designated 147 additional counties in 14 states as natural disaster areas – 128 counties in 10 states due to drought. In the past seven weeks, USDA has designated 1,892 counties in 38 states as disaster areas, with 1,820 of the counties due to drought.

The drought has pushed up prices of feed for chicken, hogs and cattle, forcing ranchers to either find cheaper sources of feed or slaughter animals sooner, which has squeezed profits of food companies.

The worst US drought in five decades pushed the global food price index up six percent in July, according to a report by the United Nations’ Food and Agriculture Organization.

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